Ideas & Debate

New LSE report projects light at the end of tunnel for Africa

LSE

A trader works at the London Stock Exchange. The latest report from the bourse contains some good news about the prospects for African markets during the current year. PHOTO | AFP

The second edition of the London Stock Exchange’s Companies to Inspire Africa 2019 report is out and it packs some good news; Kenya leads the way in eastern Africa with 66 companies featured in the report, which listed 360 companies from 32 African nations, identifying the “most dynamic” growth businesses—eastern Africa accounted for 40.8 percent of the firms listed.

Overall, the continent showed great progress following years of (ongoing) reforms. Companies covered showed average compound annual growth rate (CAGR) at 46 percent over the past three years – up from 16 percent in 2017.

They also posted an average compound annual employee growth rate of 25 percent. Most of the profiled companies were found within the important sectors for growth including agriculture, financial services, technology, health care and consumer services.

In today’s article, I highlight a few positives as captured in the publication. One is the signing of the Memorandum of Understanding between ELITE, the Nairobi Securities Exchange (NSE) and Financial Sector Deepening (FSD) Africa meant to explore the ELITE opportunity for the east Africa region. This is a welcome step.

What is the upside? Kenyan companies get to join an ecosystem designed for growth, access to expertise and funding, introductions to advisers and investors, mentorship and business support. Further, businesses will be able to tap into a wider community of over 1,000 ELITE firms from around the world.

Since the programme’s initial launch in Morocco in 2016 (in partnership with Casablanca Stock Exchange), it has expanded into West Africa with BRVM countries in 2017. Today, there are over 70 companies from across Africa which are part of the ELITE international community, together generating in excess of Sh250 trillion and employing over 20,000 people.

Another vital point is the announcement of a new UK partnership with Africa centred on high quality investments for job creation and inclusive growth.

A total of Sh460 billion is pledged to be invested in the private sector over the next four years – currently, around 1 percent of the $10.5 trillion in assets managed by the City of London are invested in Africa. Alongside this vision are plans to host the first Africa Investment Summit in the year bringing African governments together with private and institutional businesses, investors and entrepreneurs.

This portends well for the burgeoning small and medium enterprises in the region whose full potential needs to be unleashed. There are estimated five million formal SMEs in Africa, creating approximately 80 percent of total employment, 33 percent of the continents GDP and accounting for approximately 90 percent of all companies. SME’s are the true backbone of Africa’s economy.

Finally, the notable success of African companies raising capital on the London Stock Exchange; over Sh130 billion was raised last year by African companies on main market while the Sh16.7 billion was raised through the AIM. In total, over 100 companies (with a total market cap of Sh19.7 trillion and nearly 40 African bonds are listed in that market.

In all, the report proved that it is not a stretch of the imagination to envisage that Africa has finally reached a turning point that warrants global focus.